What a hold is
A hold reserves an amount on a payment method without capturing it yet. The funds are earmarked so they cannot be spent twice, but money has not moved to the merchant. Later you capture the hold or let it expire.
Escrow
Escrow moves reserved funds into a neutral holding account until a condition is met, such as a buyer confirming delivery. Then the funds release to the seller, or refund to the buyer if the deal fails.
Why it matters
- It protects both parties when fulfillment and payment are not simultaneous.
- A hold prevents double spend while a decision is pending.
- Holds and escrow balances must appear in the ledger as distinct accounts so balances stay clear.
Operational notes
- Holds expire after a window, so model the expiry as a state transition.
- Track escrow funds in their own account rather than counting them as available.
Key idea
The escrow and hold pattern reserves funds in a holding account until a condition resolves, then releases or refunds, protecting both parties when payment and delivery are separated in time.